Tesco 2012 Annual Report Download - page 102

Notes to the Group financial statements
Cash and cash equivalents
Cash and cash equivalents in the Group Balance Sheet consist of cash at
bank, in hand, demand deposits with banks, loans and advances to banks,
certificate of deposits and other receivables together with short-term
deposits with an original maturity of three months or less.
Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale
if their carrying amount will be recovered through sale rather than
continuing use. Non-current assets (and disposal groups) classified as
held for sale are measured at the lower of carrying amount and fair
value less costs to sell.
Leasing
Leases are classified as finance leases whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
The Group as a lessor
Amounts due from lessees under finance leases are recorded as
receivables at the amount of the Group’s net investment in the leases.
Finance lease income is allocated to accounting periods so as to reflect a
constant periodic rate of return on the Group’s net investment in the lease.
Rental income from operating leases is recognised on a straight-line basis
over the term of the lease.
The Group as a lessee
Assets held under finance leases are recognised as assets of the Group
at their fair value or, if lower, at the present value of the minimum
lease payments, each determined at the inception of the lease.
The corresponding liability is included in the Group Balance Sheet as
a finance lease obligation. Lease payments are apportioned between
finance charges and a reduction of the lease obligations so as to achieve
a constant rate of interest on the remaining balance of the liability.
Finance charges are charged to the Group Income Statement. Rentals
payable under operating leases are charged to the Group Income
Statement on a straight-line basis over the term of the lease.
Sale and leaseback
A sale and leaseback transaction is one where the Group sells an asset
and immediately reacquires the use of the asset by entering into a lease
with the buyer.
The accounting treatment of the sale and leaseback depends upon the
substance of the transaction (by applying the lease classification principles
described above) and whether or not the sale was made at the asset’s
fairvalue.
For sale and finance leasebacks, any profit from the sale is deferred
and amortised over the lease term. For sale and operating leasebacks,
generally the assets are sold at fair value, and accordingly the profit or loss
from the sale is recognised immediately in the Group Income Statement.
Post-employment and similar obligations
For defined benefit plans, obligations are measured at discounted present
value (using the projected unit credit method) whilst plan assets are
recorded at fair value. The operating and financing costs of such plans are
recognised separately in the Group Income Statement; service costs are
spread systematically over the expected service lives of employees and
financing costs are recognised in the periods in which they arise. Actuarial
gains and losses are recognised immediately in the Group Statement of
Comprehensive Income.
Payments to defined contribution schemes are recognised as an expense
as they fall due.
Share-based payments
The fair value of employee share option plans is calculated at the grant
date using the Black-Scholes model. The resulting cost is charged to the
Group Income Statement over the vesting period. The value of the charge
is adjusted to reflect expected and actual levels of vesting.
Taxation
The tax expense included in the Group Income Statement consists of
current and deferred tax.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted by the balance sheet date.
Tax expense is recognised in the Group Income Statement except to the
extent that it relates to items recognised in the Group Statement of Other
Comprehensive Income or directly in the Group Statement of Changes
in Equity, in which case it is recognised in the Group Statement of Other
Comprehensive Income or directly in the Group Statement of Changes in
Equity, respectively.
Deferred tax is provided using the balance sheet liability method, providing
for temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
taxation purposes.
Deferred tax is calculated at the tax rates that have been enacted or
substantively enacted by the balance sheet date. Deferred tax is charged
orcredited in the Group Income Statement, except when it relates to items
charged or credited directly to equity or other comprehensive income,
inwhich case the deferred tax is also recognised in equity, or other
comprehensive income, respectively.
Deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary
differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance
sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the assets
tobe recovered.
Deferred tax assets and liabilities are offset against each other when
thereis a legally enforceable right to set-off current taxation assets
againstcurrent taxation liabilities and it is the intention to settle these
onanet basis.
Foreign currencies
Transactions in foreign currencies are translated at the exchange rate on
the date of the transaction. At each balance sheet date, monetary assets
and liabilities that are denominated in foreign currencies are retranslated
atthe rates prevailing on the balance sheet date. All differences are taken
to the Group Income Statement.
The assets and liabilities of overseas subsidiaries denominated in
foreign currencies are translated into Pound Sterling at exchange rates
prevailing at the date of the Group Balance Sheet; profits and losses are
translated ataverage exchange rates for the relevant accounting periods.
Exchange differences arising are recognised in the Group Statement of
Comprehensive Income and are included in the Group’s translation
reserve. Such translation differences are recognised as income or
expensesin the period in which the operation is disposed of.
Note 1 Accounting policies continued
98 Tesco PLC Annual Report and Financial Statements 2012